The Blog

Q&A: An outsider’s view on the Houston real estate market

Svenja Gudell is part of a team of economists, analysts and data scientists traveling the country as part of a mission to study housing issues and trends affecting real estate markets.

“Real estate is local, and I think it’s really important to go into separate markets and see what people are dealing with, what some of the concerns are, some of the challenges and how can they be addressed, and then taking that conversation to the national level,” said Gudell, chief economist for Seattle-based Zillow.

The team’s latest pro-ject is Housing Roadmap to 2016, a national tour exploring issues Americans face in their neighborhoods and communities, whether it’s affordability, income inequality or sprawl.

After previous events in Seattle, Denver, San Francisco, Miami and Detroit, Roadmap arrives in town on Wednesday at the Hilton Americas-Houston, where Zillow will host a conversation with Stephen Klineberg, founding director of the Kinder Institute for Urban Research at Rice University, and a panel discussion with local housing leaders and other Houstonians who study real estate trends and housing patterns for a living.

REAL ESTATE

Gudell sat down with the Chronicle to share some of her research and impressions. Edited excerpts follow.

Q: What is something that stands out to you about Houston?

A: You actually have several city centers, several downtown areas.

And commute times, therefore, are fairly spread out in terms of income distribution. It’s not just because you have a lower-end home and you live a little bit cheaper you’re having to spend an hour and a half to get to work (and) people who have high-end homes are only commuting for 10, 15 minutes.

Everyone’s almost equally bearing that brunt of a fairly longish commute.

Q: How would higher interest rates affect the housing market?

A: I think you’ll see some regional difference in how interest rates impact different markets. Take San Francisco, where the median home price is $1 million and people are stretching to make that purchase.

If rates rise there, you’re already spending close to 40 percent of your income on your mortgage payment.

If you have to pay a little bit more, it’s going to start becoming painful very quickly. If you look at a market like Houston, where overall folks are spending 12 percent of their income on their mortgage, moving from 12 to, say, 13 or 14 percent with a rise in mortgage rates isn’t going to make as big of an impact.

Q: What impact have you seen low oil prices have on Houston housing?

A: If you look at home values, they’re much less impacted by these swings in oil prices, whereas rents are just much more responsive.

The cycle of a rental is much quicker. If you buy a home, you’re not going to sell and rebuy and sell and rebuy. You’re usually going to stay in a home, and the horizon’s much longer on that purchase. The pricing is much faster in rentals, where you renew every year or every two years. …

Houston is actually a very strong market right now, and it can take a blow in a sense that it’s in a good spot to absorb that kind of shock. Home values are up 8 percent annually in July. Rents are up 5.4 percent.

Q: What do you see as Houston’s biggest challenges?

A:If I had to give you the top ones, I’d say transportation, inequality and affordability, because affordability is really what makes Houston tick right now. Then, economic diversity.

Q: How concerning is affordability in Houston?

A: We’re seeing a lot more income growth in the top end of the income distribution than in the bottom. That’s been causing issues all around.

Houston right now is still now extremely affordable, but you’re starting to see an impact on lower-end earners. They have to spend a larger share of their money on housing costs, 22 percent now. It’s shocking almost to see the steep rise in that percentage. That could turn into a problem pretty quickly.

Q: Have you been to Houston before?

A: This is my first time. We’re going to look around and learn the area, which is one of my favorite parts of doing these tours.

It’s so interesting to go into these markets and get a firsthand impression, because numbers don’t tell you everything.

Q: Has anything surprised you about it so far?

A: I was surprised by the amount of green everywhere, the amount of parks. It’s nice to see.

And just flying in and landing and seeing the sheer size of it. You can see forever, especially coming from Seattle, where you have mountains and water.